The Latin American historical hero is
frequently depicted on horseback and brandishing a sword as if ready to make
kebabs out of all opponents. This icon of leadership quietly impoverishes the
diversity of leadership styles, and possibly corporate performance as well.

Fittingly, this post- Carnival issue
focuses on the role of virtue in leadership. It turns out that the most
effective business leaders are not the alpha males epitomized by the press - or
in our
historical monuments; but those who lead exemplarily; see more in the Feature
Article.

Not only out of virtue, but also as a result of
rational choice; and
quoting examples from Mexico and Brazil; we call your attention to opportunities for growth in selling to the poor. Besides offering profitable
opportunities, these new ventures may well help business to grow while developing new leaders
and perhaps new leading styles too. Look this up in Managerial Insights.

In
Nourishment for the mind and Soul we bring you excerpts of a The Guardian
article on Louise Bourgeois, who, at 92, cannot help to continue to create.

Readership
multiplied by 20 since September last! We are now over four thousand sixhundred
hundred and we receive kind letters of praise from the likes of AMCHAM Brazil
and Intel Capital (Latin America). We also begin to interact with readers as you may gather by reading the readers' reactions,in
the From our Readers section.

Who
makes up the NewsLeader tribe? It
is hard to figure out exactly who we are as we grow so rapidly; but of those
over 4600 subscribers, over half are in Brazil, another one thousand are elsewhere in Latin
America, and the rest, over 1000, are mostly in English speaking countries. Well
over
three thousand of our subscribers are business persons, and over one thousand
are mostly in academic life, but also in politics, public administration and
journalism.

Please continue to circulate NewsLeader among your colleagues and
continue to interact with us in any way you wish, including with recommendations for new
topics. It is very rewarding to notice we do feel a need.

Yours
gratefully,

The Editor.

IN
THIS ISSUE

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During
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Feudal values boost stock price

Alfredo
Behrens

Humility,
loyalty, integrity are virtues frequently taken to be pre-capitalist in
the sense that, having no exchange value, they cannot fetch a price.
Yet, what if feudal virtues turned out to add value to a company's
stock?

In a world leaning towards
entertainment rather than information, the likes of Jack Welch, Lee
Iacocca andGianni Agnelli
are bound to be better known than Darwin Smith, CEO of Kimberley-Clark.
However, Smith’s tenure led to his company outperforming the stock
market by almost twice than GE under Welch’s own tenure.

Indeed, under
Smith, Kimberley-Clark, outperformed stars like Hewlett-Packard, 3M and
Coca-Cola, let alone Chrysler or FIAT. Nonetheless, for six years
running, Fortune declared the
now notorious ENRON “the most creative company in America,”
while Darwin Smith did not make even the specialized business press’
headlines.

Jim Collins led
a five year study into almost 1500 American companies seeking to unearth
what was it that leaders had in common when they succeeded in turning
failing companies into great ones. The leaders themselves he called
Level 5 Leaders.[1]

Personal
humility is one of the common characteristics and one of the reasons
that the leaders were relatively ignored by the press. Neither Smith,
nor Gillette’s Colman Mokler, nor Abbott’s George Cain sought the
press. Neither did the eight other Level 5 Leaders. Further, when
interviewed, those leaders would credit their collaborators more readily
than themselves. When hard pressed to explain what made them so
effective many of these non-celebrity business leaders would also claim
that they were simply lucky.

Luck may have
had some role, but it did not help their competitors as much. For
instance, Abbott Laboratories outperformed the stock market permormance by twice as
much as Merck or Pfizer did. Circuit City’s Alan Wurtzel helped that
company outperform the stock market by almost 19 to 1; but Mr. Wurtzel
claimed that luck also helped him find
the right successor.

Why would
humility be so important?

Perhaps because
it allows for close collaborators to feel dignified by their work, for
they are more likely to take credit for their own work than would, say,
collaborators of FIAT’s Gianni Agnelli; too busy cruising “his car across
red lights, with his chauffeur cowering in the back seat.”

Perhaps as
important, the humility of the Level 5 Leaders also assures that
lower-ranking collaborators will feel that their best efforts are made
on behalf of something larger than themselves, even larger than their
bosses. An impression that would not be borne as readily by the workers
of Scott Paper under Al Dunlap, the “Rambo in pinstripes,” who
pocketed $100 million for less than two years of downsizing at Scott
Paper. The latter’s performance, incidentally, was surpassed by
Kimberly Clark under Darwin Smith.

Besides
personal humility, these Level 5 Leaders also displayed a relentless
resolve. Darwin Smith worked through his radiation therapy to cure him
from cancer. George Cain - himself an 18 year insider and heir of Abott
Laboratories - had to wipe the company clean of the traits of nepotism
that had stalled its creativity. Charles R. "Cork" Walgreen
III shifted his business out of the food service sector; where it had

invented the malted milk
shake and where led
the market with over 500 restaurants.

Where does
their resolve come from? One may only speculate, but drawing on the Jungian
foundations of Jaworski’s Synchronicity,[2]
one may admit that in this larger-than-human resolve there is a well of
certainty that may stem from a feeling of “oneness” in which the
individual leader flows in a river of unconscious determination, larger
than himself. This allows us to better understand Collin’s
appreciation of “an even stoic resolve” in the determination with
which these leaders followed their destiny, and instilled
“discipline” within the rank and file. Discipline, in this context,
does away with the need for bureaucracy and puts each person at his own
helm.

Under this
approach “personal humility” makes more sense; because the leader
feels he is only allowing himself and others to flow with a force beyond
his control, which, in Collin’s study the leaders referred to as
“luck”, perhaps for lack of a better word.

In this role,
attuned with a force larger than oneself, the leader acts more as
Greenleaf’s Servant
leader; geared to serve his organization over himself; thus also helping
to understand the readiness with which Collins’ leaders credited their
collaborators for the company’s success; and the care they put into
selection their successors. The latter is in itself
a
litmus test for stewardness, rather than personality cult.

You may
disagree with my attempt to reconcile the seemingly disparate character
traits and the behaviour of the most effective corporate leaders singled
out by Collins, but one thing is for sure: celebrity leaders did not
lead corporate performance as high as Collin’s Level 5 Leaders did. In
fact quite a few celebrity leaders even tarnished
the reputation of their companies much in the same way that, in
politics, a comparable style of celebrity leadership helped wreck the
economies of countries like Argentina,
or Ecuador.

However, Collins’ work has returned the lost lustre to leaders who,
holding precisely these old-fashioned virtues, have led their companies
to unparalleled success; and in the process of doing so, these leaders
paved the way for their own succession.

Further
reading on qualities of leadership: there is an endless list of
psychological qualifications for leadership, but - given Jack
Welch's standing in the leadership field - it is not a waste of time to see Jack's
own list, in a reproduction of his Wall Street Jounal
article of last January 23rd.

Selling to the poor
may well be your next market

Alfredo
Behrens

There is a lot
of waste energy hanging around us, but engineers are quick to point out that it
is hard to harness waste energy and put it to useful work. The same with the
poor; however ubiquitous they still are too scattered over the planet and each
one has too little to spare to pay you with.

This is why
marketing gurus have frowned upon the poor. However nasty that may sound, it has
always been hard to argue with the diagnosis. This is why it is refreshing to
read about a new initiative to reinstate the poor as King of Growth by C.K.
Prahalad, professor of corporate strategy at Michigan Business School.

In “The
Fortune at the Bottom of the Pyramid,” to appear in the next American Summer,
Professor Prahalad adds up all the purchasing power of the poor in the largest
developing countries and comes up with a potential market, of sorts, larger than
the GDP’s of the largest European countries plus Japan. Such a market begins
to sound interesting, perhaps not enough for a multinational to move in any of
those poor markets, but enough to trigger awareness. If a company is already
present in a country with many poor, could the company – multinational or not
- be missing an opportunity? Perhaps.

Professor
Prahalad’s adding-up of the poor is effective in raising awareness, but if you
are in the cement business in Mexico it might not help to know that you are
missing out on customers in Indonesia. Yet, what if you were missing out
opportunities in Mexico itself? This is precisely what Cemex discovered in
Guadalajara: a way to sell to the poor and make a stable profit while at it.

Cemex is the
World’s third largest cement manufacturer and Mexico’s largest one. In the
course of its business Cemex realized that while its large construction clients
offered a profitable niche, their demand tended to be more volatile than the
“build-it-yourself” one. The latter market consists mainly of poor
households earning less than $5 a day; far from Cemex’s typical client. The
interesting issue is that this market offered a significant growth opportunity.

Cemex
moved to organize this market by building on the social capital of the poor:
their inherent networking abilities and solidarity liaisons. Small teams of
three to ten people were bundled into saving teams focused on home improvements.
To them Cemex offered credit to buy cement as well as ancillary services:
architectural and engineering advice, plus schools for construction workers and
deposits for the cement and other building equipment.

A few years
later Cemex brags having extended $10 million in credit to the poor and having
made 36 thousand new customers. Cemex is still is adding over 1500 new customers
every month. By 2005 Cemex expects to have close to 1 million customers among
the “build-it-yourself” market niche. Margins are 3 percentage points lower
than the average in the business, but Cemex has extended its market into a
vaster and more stable market. Besides, plenty of opportunities now exist for
cross-selling, which remain still untapped.

Knowledge
@ Wharton also points out to other success stories such as Hindustan
Unilever’s in selling soap to
poor Indians. But one can also point out to high short term losses made by
ill-advised incursions in those markets, like the one of Lloyds Bank in Brazil
when it bought the financial house Losango.

Losango
specializes in extending conventional credit to poor households to buy
electricity-operated household equipment like pressing irons and beaters. Lloyds saw in Losango an
easy opportunity to elbow its way into the financial services to the poor; only
to find out, as unemployment increased, that bad loans were too many besides too
small and too scattered to deserve the effort a foreign bank would have to deploy
to clean-up its books. Central Bank guidelines - perhaps inadequate when dealing with loans to the poor
- did not help
either, as they called for higher-than-necessesary reserves for this type of bad loans;
because poorer borrowers make better payers.

For a time
“Losango” was known at Lloyds’ board of directors' meetings as “Loss and go”, as
Lloyds would have gladly gotten rid of Losango, had they been able to. They were not
and they finally managed to turn Losango around into a significant money maker,
capable of interesting HSBC,
as it bought Lloyds out of Brazil.

Hot Tip

Think
out of the box, suspend your jugdgment and your "Big Five"
consultants, call on your local university's social scientists and discuss
the new venture into the "poor's market" with a bold and younger
executive team which the experience may shape into your company's future leaders.

As the Losango
case illustrates, moving into the lower income markets is not the for
faint-hearted. It requires a specific marketing strategy, one that may involve
the knowledge of professionals not close to conventional decision makers. Cemex
relied on the wisdom of a former socialist advisor to Chile's President Allende. In some
ways you would do well in suspending your reliance on conventional advisors, too
prone to tell you the new strategy will not work. The strategy also requires resolve and an unusual dose of audacity and
managerial low-fat flexibility.

None of the
above are likely to come easily, but perhaps selling to the poor may also prove
a valuable ground to form new business leaders. Surely a company - multinational
or not - can think of a couple of fast track executives eager to try their teeth
on a challenge. One can think of Brazil’s intercity transportation business
allocating a few heirs to develop new transportation services more attuned with
the needs of the poor, or
Argentina’s industry testing its proverbial inventiveness in selling food
and cleansing materials to its own poor.

After all, current macroeconomic
conditions in most Latin American countries leave little hope for growth as
usual. Growth by mergers and acquisitions is one of the most boring
alternatives, and one soon to run into anti-trust regulatory difficulties; such
as Nestlé
(Brazil) did, when it attempted to buy Garoto.

Cemex’s and
Lloyds' way
points out to an interesting growth avenue, one also likely to allow private
business to grow in an even more socially responsible way; while also providing
good testing grounds for future leaders.

In this section we aim to provide intersections between art and work.
Ocassionaly we find examples of artists at work, as in this text, excerpted from The
Guardian,
Thursday February 26, 2004

Louise
Bourgeois, the grande dame of US art, is 92 and still working. To mark the
opening of a new show, we (The Guardian) asked artists, writers and
critics to put a question to her. Adrian Searle introduces the results

Louise
Bourgeois studied under Leger (who convinced her she was a sculptor rather
than a painter), had known Bonnard and Breton, Brancusi and Duchamp, yet
she could never be defined as belonging to a generation or a movement. Her
career has also mirrored the place of women artists in the 20th century.
To mark the opening of an exhibition of her work at the Fruitmarket
gallery in Edinburgh, I (Adrian Searle) asked a number of artists, critics
and writers to provide a question for her, on a topic of their choosing.
Some asked more than one.

Louise
Bourgeois: I don't watch TV. I don't use a computer, a fax or a cellphone.
I'm not driving or flying anywhere. So in the end I'd have to say it's the
radio. I listen to the radio at night.

Marina
Warner (writer): Did part of growing up in France mean contact with the
sensory rituals and atmosphere of the Church, and its beliefs in an
incarnate god? And did any of this connect with your imagination of the
flesh?

LB: I
was raised a Catholic. But I am not religious. In my work, I am interested
in real flesh and blood.

Juergen
Teller (photographer): How important has sex been to your work?

LB: I
think sex and the absence of sex is terribly important.

Richard
Wentworth (artist): You obviously like oppositions. You have spoken
sometimes about your father so I have always wondered - how is the female
artist's intelligence different from the male's? What if you were a man
and your mother had been a powerful source for your work?

LB: I
can only talk from the perspective of a woman. I cannot speak for a man. I
have never been a man yet. My mother believed in me. She was a feminist.
Had I been a man, I don't know how that would have changed our
relationship. I did have a brother. Had I been a man, it would have been
very different relationship with my father. In many ways, I was the
successful son that he wanted. After all, I was his spitting image.

John
Berger (writer): Is there space everywhere or only in some places?

LB:
Space is something that you have to define. Otherwise it is like anxiety,
which is too vague. A fear is something specific. I like claustrophobic
spaces, because at least then you know your limits.

JB:
Is there a musical instrument whose sound is a little like that of your
drawings?

LB:
The piano. Sometimes the drawings can be a simple note or sometimes they
become quite elaborate like chords.

JB:
What has recently given you "goose-pimples"?

LB:
[The thought that] my source of inspiration would disappear.

JB:
At your age, do some of the surprising works you have made now walk beside
you instead of confronting you?

LB: I
am exclusively interested in what I am working on now. Once I finish a
work it leaves the house and is gone and has served it's purpose.

Tacita
Dean (artist): Do you forget how old you are when you draw?

LB:
I've always said that the emotions I'm interested in exploring have no
relationship to gender and for that matter age.

Darian
Leader (psychoanalyst and writer): After all these years of work, which
ideas and materials do you find yourself drawn back to?

LB:
My themes always come and go, but they always remain constant. The
inability to make yourself loved is always at the root of the problem.
Sometimes I work to be loved, and other times I work because I don't feel
loved.

DL:
Has there been a sustained period when you were unable to work? And do you
have an idea why?

LB: I
have never stopped working. There have been moments of depression that for
sure took its toll. But I also know that I could always depend on my work
to get me out of the depression.

Marlene
Dumas (painter): What keeps you working?

LB:
Some people say that everything has been done in art. I say the exact
opposite. I still feel that there is a lot I want to say and I have to
say.

Cristina
Iglesias (sculptor): What is the place of fantasy in your work? As a state
of mind can it be useful?

LB:
I'm not concerned with fantasy in my work. I'm interested exclusively in
today, the here and the now.

Francis
Upritchard (artist): What is your most recent memorable dream?

LB: I
don't remember my dreams. I do remember a dream of long ago where my
father was crying and a cat came and gobbled up his tears.

Chris
Ofili (painter): If you have a recurrent dream, what might be its
soundtrack?

LB: I
compose my own music. In fact, I sing all day.

Adrian
Searle: What has your work taught you?

LB: I
feel my work has made me a nicer person. Or at least I hope so because I'm
trying to be good.

Technology and
entrepreneurial leaders: a match made only in Heaven?

That was the title
of the feature article in the December issue which gave place to much
insightful feedback from readers in different countries, backgrounds and
bread-earning activities. You may find the full article in www.newsleader.blogspot.com.

In a nutshell, the article aimed at dispelling the deleterious belief that
Latin American managerial creativity is doomed because the region's inventiveness
finds no emotional foothold in a culture which is predominantly Catholic.

I argued that a traditional low self-esteem on this issue was bolstered by work such
as that of Max Weber and a few historical accidents, such as the
Dutch invasion of Recife, whose short life-span, left, understandably, nostalgic feelings
in many Brazilians.

Without attempting to turn historical events into a
parlour game I also argued that Protestantism had a mixed entrepreneurial
record when it came to the USA itself; and for all the above reasons Latin
American entrepreneurs had their future in their own hands and only
themselves to blame for their eventual failures.

Below I
reproduce -in their original languages - a selection of the letters received, and following them,
with my recognition and gratitude to the seriousness of the readers'
gracious efforts, I add a rejoinder of my own, in English; which I will gladly follow-up
with the same commentators, of even with new ones.

In
my opinion, the question is not related to what religion, but ethics.
Technology thrives when it is protected by patents, and when the business
enviroment is protected by a decent Judiciary. In Latin America, our
"expert" politicians decided not to recognize patents, a direct
form of theft, in order to favour a few local businessmen, which in turn
found that the risk involved in investing in technology, was replaced by a
risk free investment in political contributions. If this region is
to succeed in this globalized world, we need to have an ethical enviroment
which allows us to develop, compete, and succeed.

Indeed, the
Prince of Nassau was an exemplary figure, as Claudio de Moura Castro
points out; perhaps exemplary to the point of diminishing the importance of the
Prince's cultural heritage as the source of his creative influence in Brazil’s
Recife when he was entrusted with the administration of a region
invaded by the Protestant Dutch. Claudio may well be right in stressing the personality issue over
the cultural one in oposing the niceties of the Protestant Prince with the
dullness of the Protestant Ducth or even the Catholic Portuguese
administration of Recife - before and after the Prince.

Nonetheless, I recollect similar nostalgic reminiscences byt Latin
Americans, this time regarding the
British incursions in the River Plate area. Both, the
Dutch and the English, were
Protestant invasions on Catholic dominions. Yet, despite the two centuries
between them; despite their manifest commercial interests- as Nicolás Nobile rightly points out - and despite the British
invasions not rendering a figure to the historical standing of the Prince
of Nassau; both Protestant invasions brought about an undeniable cultural renewal with them.

There is something in the work ethic of Protestantism that
Catholics intimately know is different, and at times, perhaps even more
effective. This is why those Protestant invasions are recalled with
nostalgia: because those Protestant invasions brought with them cultural
feats in engineering and the arts and culture that the Catholic
authorities had neglected for too long.

However, it need not always have been like that, after all, one of the
most impressive start-up venture of all times – Cristopher Columbus’
own - was a Catholic venture! Which helps to show that Protestantism was
not and therefore need not always be, more effective at innovation!

Nicolás is
also right in stressing, more than I did, the significance of Max
Weber’s opus magna. Yet, when tracing the roots of an historical trauma,
I was not as interested in what Max Weber precisely wrote, but rather in
the social function of his work. Under this light, what the people believe
Max Weber wrote may be more relevant in legitimizing and shaping a sense
of despair among Latin American entrepreneurs, even among those who toil
oblivious of Max Weber.

Then,
there is the real side of business, helpfully pointed out by Tony Keen:
many Latin American governments have not done enough in protecting
intellectual rights, a necessary condition in fostering the development of
technology. Worse, many governments have created and environment which
distracts honest entrepreneurial activity from investing in productivity
increases.

I have no doubt about
the relevance of Tony's comments; our countries do have a problem with
this issue. However, I like to believe that Latin America’s travails
with corruption is more political than cultural. By this I mean that the
issue which should concern us is whether such “regulatory environment”
is intrinsically cultural (Catholic?), in which case oursocieties would be doomed; or whether the issue is associated with
a particular style of development, i.e. industrialization under
overwhelming government protection, as I contend. In this perspective, the
political arena reflects a concentration of economic power which
reinforces the self-serving regulatory environment; and produces research
divorced from the productive apparatus of society and poverty.

The issue of
the "regulatory environment" brings us to Ernesto
Gore’s interesting contribution. He seeks to bring the political and
cultural issues together: Protestantism may foster a more creative
intellectual environment through a more appropriate regulatory environment,
which may draw on both Catholic and Protestant traditions.

Ernesto may well be right, for individual-centered Protestantism
may be more adroit at stimulating personal initiative than top-down
Catholicism would ever be able to. Yet, again, let us recall Christopher
Columbus' maiden voayage to the New World. Protestants were among those
that reamained ashore in fear of a flat Earth.

In my view,
that of an agnostic; our received Catholicism reflects the powerful
hierarchy of the Catholic Church, a top-down command and control
bureaucracy. In fact the Catholic Church’s bureaucratic model is not
very different from the XIX century military-based managerial model
adopted by the most successful American businesses during much of the XXth
century.

Despite the
similarity in the models, we cannot hold that because of the current Catholic
church's resistance to modernization that the XIX century managerial model
was ineffective in producing and deploying the technological
revolution that keeps us in a state of awe.

That the control model may be
found stifling today does not mean that it had no use and was
intrinsically wrong, or even poor. The same with the Catholic Church, who
until recentely, with figures of the stature of a Teilhard de Chardin,
would have wanted man to become the "spearhead of evolution;"
yet now oposes research on stem cells.

So, if both the
Protestant business managerial command and control model is shared by the
Catholic Church's bureaucracy and Protestant business in the New World and
Australasia lies on a Catholic exploratory business venture; we cannot lay
back on the half-learned century-old efforts of Max Weber and sustain
that there is no way to bridge the gap.

As Ernesto
points out, both organizational structures
draw on one another. What we need is to explain the cultural roots, if
any, of the economic differences, i.e. such as those between French and
English Canada, and act upon that information. We
must understand the roots of the incontrovertibly superior
effectiveness of the social organizations in most of the Atlantic
Northern hemisphere, in developing the technologies which free people from
the constraints of hunger, disease, idiocy and physical labour. That
is what most of development is all about.

Perhaps we may
look further into the different ways in which Protestant and Catholic
social organizations deal with the individual; on how they construe their
social goals and on how those affect technological development and
deployment.

We may have to
look for the answers in further exchanges, which I would gladly welcome.Perhaps some may wish to contribute as a guest
authors.

In the meantime,
let us not distract our thinking entrepreneurs: investing in productivity increases is the only
way out to sustain competitiveness; and it is investing in technology that helps.
That was the reasons I wrote the article in the first place.

Provocative insights under 400 words long will receive our attention more
rapidly. Larger pieces may be abridged without consultation with
the author. Guest authors may wish to submit contributions in English,
Spanish, Portuguese, French or Italian. Please use Arial 12 font
and with each submission and include
a statement indicating the work submited is your own. Please also submit
your affiliations, email address and CV or Oxford
Muse like portrait. Authors will only be notified when their
contributions are selected for publication.

Copyright 2003: Authors retain copyright of their work. Alfredo Behrens
is entitled to all other rights concerning NewsLeader, except the template
design. You are encouraged to make use of the views and information provided
herein, as long as you appropriately give credit to the author and quote
this Newsleader's issue number and date.

Alfredo Behrens is an economist. He holds a PhD by the University of Cambridge, has lectured at Princeton’s Woodrow Wilson School, at FSU and at PUC-RJ. He has broad experience in advising high public officials, shareholders and board members of banks and large corporations on issues such as: governance, corporate relations with governments, M&As and strategic planning focused on the internationalization of companies. He has worked in or with the private and public sector in the Americas, East and Western Europe and Southern Africa. He was awarded the MacNamara Fellowship by the World Bank, the Hewlett fellowship by Princeton University and the Jean Monet Fellowhship by the European University, Fiesole, Italy.